LGBL acquired Fine Blanking technology in Mid ‘80s for manufacturing Chain plates. It further extended its fine blanking division as a separate manufacturing during the late ‘90s, to cater to high OEM demands for Fine Blanked components. Today, LGBL is a leading Fine Blanking Manufacturer having many Fine Blanking Presses in operation.

The company has 17 chain manufacturing plants, all ISO 9001 certified by Underwriters Laboratories Inc., USA. Three of the manufacturing facilities along with the central functions have been registered to ISO/TS 16949 by UL, USA.

LGB is also evolvilng itself to become a Metal Forming company concentrating on Hot, Warm & Cold forging, Blanking, Fine blanking & Precision machined parts.

Strong profit recovery

Sales grew by 5% to Rs 254.48 crore for quarter ended December 2013.

OPM improved by 220 basis points to 11.8% which took OP up 29% to Rs 30.10 crore. Other income stood at Rs 3.48 crore against a loss of Rs 6 lakh and interest cost was down25% to Rs 3.91 crore. As Depreciation rose 6% to Rs 7.88 crore, PBT jumped 107% to Rs 21.79 crore. As provision for taxation increased 125% to Rs 4.78 crore, net profit jumped 102% to Rs 17.01 crore.

Nine month results

For the nine months sales grew 5% to Rs 727.43 crore.

OPM improved by 150 basis points to 11.5% which took OP up 20% to Rs 83.64 crore. Other income stood at Rs 4.32 crore against Rs 1.20 crore and interest cost was down 26% to Rs 12.97 crore. As Depreciation rose 7% to Rs 23.19 crore, PBT jumped 64% to Rs 51.80 crore. As provision for taxation increased 63% to Rs 11.25 crore, net profit jumped 64% to Rs 40.55 crore.

Segment results

For the quarter, sales from the Transmission Division grew 15% to Rs 190.93 crore and accounted for 75% of total. PBIT from the same grew 11% to Rs 19.58 crore and accounted for 76% of total.

For the nine months, sales from the Transmission Division grew 15 to Rs 530.34 crore and accounted for 73% of total. PBIT from the same grew 30% to Rs 56.87 crore and accounted for 88% of total.

For the quarter, Sales from the Metal Forming Division grew 17% to Rs 41.93 crore and accounted for 16% of total. PBIT from the same stood at Rs 4.79 crore against Rs 12 lakh and accounted for 19% of total.

For the nine months, sales from the Metal Forming Division grew 1% to Rs 119.86 crore and accounted for 16% of total. PBIT from the same jumped 194% to Rs 12.81 crore and accounted for 20% of total.

PBIT from ‘Other' grew to Rs 1.34 crore against a loss of Rs 1.98 crore for the quarter. For the nine months loss from the same stood at Rs 4.91 crore against a profit of Rs 99 lakh.

Dominant market share

The company has a around 70% market share in the OEM chains segment and around 50% market share in the replacement segment.

The company's chain manufacturing plants are all ISO 9001 certified by Underwriters Laboratories Inc., USA. Three of the manufacturing facilities along with the central functions have been registered to ISO/TS 16949 by UL, USA.

The technology is the entry barrier in this business as the chains are precision components. As the vehicles become more and more sleek and powerful, chain quality has to improve. Strong reverse engineering department enables the company in introducing new products. ROLON brand of the company enjoys premium in the market.

Two-wheeler industry is growing

The Transmission segment mainly caters to OEM's and Replacement market for two-wheelers. The OEM which constitute about 60% of total sales and includes clients like Bajaj Auto, Hero Honda, TVS etc all have good growth prospects. On similar account, the replacement market is also doing well and is growing in same line with OEM's.

The share price trades at Rs 307.